*disclaimer: Not all individuals will qualify for each loan type and/or scenario. Please contact me to see if you'd qualify for these loan products and/or discuss your options. The numbers included within the article are in no way specific to costs, or in reference to a specific borrower or situation.
Many people who are purchasing a home for the first time go into the loan process thinking that their down payment will cover their closing costs.
Unfortunately, that's not the case.
In short, a down payment on a home is the money that a borrower gives up-front that goes towards paying off their mortgage. Closing costs on the other hand, are there to pay for the work completed in order to put your mortgage together. This includes appraisal fees, underwriting fees, title insurance fees, and other fees associated with the originating of your loan.
An example of a down payment (not associated with any specific loan or person), would look like this: "A home sells for $800,000. A borrower puts a down payment amount of $160,000 down on the home at closing. They now receive a loan from the bank for $640,000 and will now only have to pay $640,000 back to the bank in order to pay off their home."
An example of closing costs (costs are provided as a generic example only and do not include all costs associated with a typical mortgage) look like this. On top of their down payment, a borrower will also need to come to the closing table with $4,000 of closing costs. This includes an appraisal fee of $500, an underwriters fee of $500, a title insurance fee of $500, and a rate buydown fee of $2,500.
Here's the good news. In some instances, the seller's of the home can pitch in towards a borrower's closing costs. By law, the sellers are only allowed to help pay for a percentage of the closing costs, but it is an option that is available if both parties agree on it.
For more information regarding what's involved with closing costs and down payments, please feel free to contact me. I'd love to help you prepare financially to purchase or refinance a home.
*disclaimer: Not all individuals will qualify for each loan type and/or scenario. Please contact me to see if you'd qualify for these loan products and/or discuss your options. The numbers included within the article are in no way specific to costs, or in reference to a specific borrower or situation.
Brayden Ramsay NMLS #1997195
Momentum Loans NMLS # 1606597
Comments